Surprise medical billing—cases in which patients are unexpectedly billed at highly inflated prices from providers who do not accept their insurance—has attracted policymakers’ attention. In this report, we outline the economic rationale for why markets have not eliminated this behavior and present policy solutions. We emphasize that much of this phenomenon can be solved via contract reforms that require health care providers to negotiate market prices among themselves. This strategy produces market outcomes and minimizes the risks associated with rate regulation. Targeted rate caps should be considered only in cases in which contractual reforms are not feasible.
Recently, I chaired a discussion at CPAC on the importance of choice in health care, and specifically health care coverage. My fellow panelists talked about government rule-making, Medicare waivers and the many problems that approaches like “Medicare for All” create — such as interposing Uncle Sam between physicians and patients. All important aspects of the health care puzzle — but nothing that hasn’t been turned over more than once in a wonky world of $5 words and inside the Beltway policy chatter.
Surprise billing is an unexpected event that requires significant financial resources. That’s hardly a unique economic phenomenon, and the usual solution is … insurance! The unique aspect of this event, however, is that it takes place in the context of an insurance contract. What could be modified? There are really two pieces: the surprise and the bill. The former can be ameliorated by giving patients clear, up-front knowledge that they will be treated by an out-of-network provider and perhaps providing an estimate of the likely charge. That would reduce the surprise element of the phenomenon.
Legislators at both the federal and local level are trying to do something about the problem of surprise billing, what wonks often call “balance billing.” A modest, bipartisan measure proposed by state legislators in Texas would penalize emergency rooms that charge more than 200 percent above the average hospital charge for a comparable service.
A plethora of bills introduced in the U.S. Senate, including one from a group led by Sens. Michael Bennet (D., Colo.), Tom Carper (D., Del.), Bill Cassidy (R., La.), Chuck Grassley (R., Ia.), Claire McCaskill (D., Mo.), and Todd Young (R., Ind.), would limit out-of-network prices in the emergency setting to the greater of (1) the median in-network rate for a particular geographic area; or (2) 125 percent of the “average allowed amount” in a geographic area: a proxy for what hospitals charge regardless of insurer contracts.
In response to a request from Sen. Lamar Alexander (R-TN), chairman of the Senate Committee on Health, Education, Labor, and Pensions, health policy experts at the American Enterprise Institute and the Brookings Institution worked together to compile a list of policy options to slow the rate of increase of health care costs and attract bipartisan support. Among the key policy proposals:
- Limit the tax exclusion of employer-sponsored insurance
- Ensure effective anti-trust enforcement
- Discourage state governments from inhibiting free market competition
- Prevent surprise out-of-network billing
- Encourage the use of more generic drugs in Medicare Part D
Access to quality, affordable medical care should be something all elected officials can agree to work on because it’s something we all believe in, Rep. Westerman (R-AR) writes. The Fair Care Act has two primary goals: to increase the number of people with health insurance coverage and to decrease per person health spending. It’s a fair solution covering pre-existing conditions, tackling the cost of insurance premiums and increasing consumer flexibility. Highlights:
- Title 1: Private Sector Health Insurance Reforms
- Title 2: Medicare and Medicaid Reforms that Promote Solvency and Increase Access to Health Insurance Plans
- Title 3: Promote Transparency and Competition to Lower Prescription Drug Costs
- Title 4: Increase Competition and Lower Costs by Discouraging Provider Monopolies
- Title 5: Digital Health Care Reforms
| Direct primary care (DPC) is fast becoming an accepted alternative to fee-for-service payment in the private market, but it has yet to find its way into Medicare. Over two-thirds of Medicare beneficiaries have two or more chronic conditions. This is a population that would benefit greatly from high quality primary care, but the program is still built on the fee-for-service model of payment, which creates barriers to low-cost, frequent communication between physicians and their patients.CMS could test ideas like DPC to see if they can deliver better care at a lower cost to the Medicare population. |
Medicare funds health-care services for 60 million elderly and disabled Americans. Of these, 39 million receive coverage through a plan known as “Traditional Medicare” or “Medicare Fee-for-Service” (MFFS) that the federal government administers directly. Increasing numbers of seniors—21 million in 2019—enroll in Medicare Advantage (MA), choosing from competing plans managed by private insurers. MA provides an incentive for plans to develop innovative care arrangements, but the rules under which MA plans operate can be restructured so that more of the efficiency gains can be passed on to beneficiaries.
| Two Republican congressmen introduced proposals Tuesday designed to fix America’s health care system through a variety of market-oriented reforms. Reps. Bruce Westerman (R-AK) and Jim Banks (R-IN) say their Fair Care Act of 2019 “addresses major drivers of health care costs as well as obstacles hindering individuals from obtaining health insurance coverage.” It proposes a bevy of changes to the health care market. Many of the bill’s provisions target availability of insurance to those who otherwise lack access. It also allows would put in statute short-term limited duration plans and association healthplans, which would increase competition. They worked closely with Avik Roy of the Foundation for Research on Equal Opportunity in developing the plan. |
My colleague Dr. Robert Graboyes encourages us to instead think about how to produce better health (not health insurance—not even health care) for more people at a lower cost, year after year. This requires allowing and fostering the kind of revolutionary innovation in the health care industry that we’ve seen in other fields, like information technology. It requires allowing consumers to choose treatments, even high-risk ones. But it also requires innovation in the provision and payment of health care.
For instance, advancements in gene therapy and personalized treatments could one day offer a cure for cancer or disorders currently considered incurable, sometimes with only a single injection. In 2017, the Food and Drug Administration approved its first gene therapy treatment, Kymriah, for acute lymphoblastic leukemia. The FDA expects 10 to 20 cell and gene therapy approvals annually by 2025.